Link stamp duty to energy efficiency urges right-wing think tank

A centre-right think tank founded by Tory former planning minister Nick Boles is urging a review of stamp duty to link it to the energy efficiency of each home.

Policy Exchange’s head of environment and energy, Richard Howard, writes on the organisation’s website that while the UK has made great strides in improving energy efficiency - the use of electricity and gas in households has fallen by 23 per cent in the period from 2004 to 2014 - progress on further energy efficiency is slowing. 

“The UK still has amongst the least efficient housing stock and highest rates of fuel poverty in Europe. There is still huge potential to improve domestic energy efficiency” Howard claims. 

He says that with the Green Deal scheme all but abandoned, having provided energy efficiency loans to just 16,000 households against the original ambition for it to support “millions of homes and businesses”, there is now a major gap in incentives for households to pursue greater energy efficiency. 

So the think tank is now urging government to reform stamp duty so that buyers of more efficient properties would pay less, and vice versa. “A home buyer purchasing a house worth £220,000 (the median average house price in the UK) would see a £500 reduction in stamp duty costs. This would create an incentive for purchasers to buy a more efficient home, and for homeowners to upgrade their home” suggests Howard.

He also wants mortgage affordability tests to better reflect the energy performance of a dwelling. “Reforming mortgage affordability tests to reflect actual energy costs would allow a homebuyer to borrow more against a more efficient property.

The proposed changes could also encourage mortgage lenders to offer energy efficiency mortgages to finance energy efficiency upgrades: a low cost form of finance compared to the loans previously available under the Green Deal model.”

Howard claims that the stamp duty proposal is cost-neutral while the mortgage change would require little or probably no public finance and would be in the interests of lenders as it reduces their risk.

“What’s not to like?” Howard concludes.